Petrobras Falls Below R$600 Billion as Oil Slide Hits 2-Month Low

BRAZIL · MARKETS

Shares in Petrobras fell to their lowest level in two months on Monday, as a sharp drop in oil prices erased about R$16.5 billion in market value and pulled the state-run producer below the R$600 billion mark.

How far Petrobras shares fell

The company’s preferred shares closed down 2.43% at R$43.40, while its common shares fell 2.91% to R$48.69, according to market data reported by Brazilian financial press. The preferred stock was the most traded on the local exchange, with about 47,200 trades.

The decline cut roughly R$16.5 billion (around US$2.9 billion) from the company’s market value, leaving it at R$598.7 billion (about US$105 billion). That was its weakest close since March 11.

The stock was among the biggest losers on the benchmark index for the session. Trading was thin overall, with holidays in the United States, the United Kingdom and Hong Kong reducing global activity.

Why oil prices reversed

The most-traded Brent contract for August settled down 6.78% at US$93.42 a barrel in London. The fall came as signs of progress in talks between the United States and Iran eased tension in the Middle East.

Crude had climbed sharply since late February, when the conflict involving Iran began, lifting Petrobras shares to a series of records along the way. The company reached a peak valuation of R$680.1 billion on April 14, the press reported.

Monday’s reversal unwound part of that rally, as the prospect of calmer markets pulled the oil price down from its recent highs. The move illustrates how tightly the producer’s value tracks the crude benchmark.

What analysts are watching

Despite the drop, analysts at one major bank kept a buy recommendation on the shares and named the producer their top pick in the oil and gas sector. They set a price target of R$62 for the preferred shares by December.

The analysts said they expected strong second-quarter results, with Brent averaging around US$104 a barrel between April and June. They pointed to high output and the effect of a fuel-subsidy program as supportive factors.

For investors, the episode underscores a familiar trade-off. The same oil strength that boosts the producer’s earnings also raises pump prices that the government is now trying to cushion with public funds.

Frequently Asked Questions

How much value did Petrobras lose?

About R$16.5 billion (around US$2.9 billion) in one session, leaving its market value at R$598.7 billion (about US$105 billion), the lowest since March 11.

Why did the shares fall?

Oil prices dropped sharply, with Brent for August down 6.78% to US$93.42 a barrel, as US-Iran talks eased Middle East tension and unwound part of a months-long crude rally.

How much had Petrobras risen before this?

Crude gains since late February had lifted the shares to a string of records, reaching a peak valuation of R$680.1 billion on April 14, according to the press.

What do analysts expect now?

Analysts at one major bank kept a buy rating and a R$62 price target for the preferred shares by December, citing strong expected second-quarter results.

How does this connect to fuel prices?

Higher oil prices lift the producer’s earnings but also push up pump prices, which the government is trying to soften through a recently signed fuel-subsidy decree.

Connected Coverage

The same oil move sits behind the government’s new gasoline subsidy decree and the Hormuz oil-price framework. For the company’s spending plans, see our coverage of the Petrobras investment push in Sao Paulo state.

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